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Senate subcommittee accuses Apple of tax avoidance

The U.S. Senate’s Permanent Subcommittee on Investigations claims Apple has avoided paying billions of dollars in U.S. income taxes by using offshore entities. “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” subcommittee chairman Carl Levin (D-Mich.) said in a statement. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.” The subcommittee also released a 40-page memorandum with findings and recommendations.

Apple CEO Tim Cook is scheduled to appear at a hearing on Apple’s tax practices this morning — the company released its testimony yesterday. In the testimony, Apple points out that it is “likely the largest corporate income tax payer in the US.” Subcommittee ranking member John McCain (R-Ariz.) said in a statement that “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.” The subcommittee does not appear to believe that Apple acted illegally, however, the company took advantage of legal loopholes to dramatically lower its tax burden.

One of the findings in the subcommittee’s memorandum involves Apple’s tax rate in Ireland, which is said to be less than 2 percent. The subcommittee maintains Apple’s cost sharing agreement with offshore affiliates in Ireland is “primarily a conduit for shifting billions of dollars in income from the United States to a low tax jurisdiction,” as $74 billion in sales income was shifted to Ireland from 2009 to 2012. Ireland said it’s not to blame for Apple’s low payments, claiming its system is transparent, and other jurisdictions’ tax systems are at fault, according to Reuters.